By: Alan Nevin

As published in the San Diego Daily Transcript: August 1, 2012

In the last two articles in this series on changing demographics and the demand for housing for seniors, I have discussed the enormous bulge in the graying population and the need for age-restricted housing. The most recent article focused on Alzheimer’s facilities. This article will concentrate on what is generally known as “assisted-living” facilities.

For definitional purposes, there are four types of housing that are designed for senior living.

Independent living

This kind of housing includes rental living facilities with no food or medical services. On the rental side, these facilities are apartments with age restrictions (usually 55 or 60 minimum). They generally come in two models: modest rent and luxury. The vast majority of the facilities are modest income and include a substantial percentage operated by religious institutions and other nonprofits.

On the sale side, there is the Del Webb type of community, with golf and elaborate recreational services. The typical buy-in age in one of these communities is early 60s, compared to the average age of 80+ in an independent living rental facility.

Independent living with food services

A typical (and high-quality) example is The Patrician in UTC. These facilities generally have social activities but no medical care. If medical care is needed, it is imported on an “as-needed basis.” The typical profile of a resident is a woman more than 80 years of age.

Alzheimer’s/impaired memory

These facilities are more like skilled nursing facilities because of the ratio of patients to employees. Most of these facilities have 40-60 beds. As 45-50 percent of persons over 85 have some form of dementia, this sector of the industry is destined to grow over the coming years. By the way, Alzheimer facilities are typically $5,000-8,000 per month, which means that most Alzheimer’s patients will be cared for at home or in government-sponsored facilities. Not a pretty picture for the budgets of aging seniors or their children.

Assisted living

Now to the heart of this article: the assisted-living facility. Assisted-living facilities may be either rental or buy-in.

The buy-in facilities typically are geared to the affluent sector. Projects like Hyatt’s Vi in Costa Verde or La Costa Glen in Carlsbad typically have units priced at $300,000-$800,000 (part of which may be refundable). They had substantial success until the housing market crashed because almost all their residents had to sell their homes to afford their new digs. La Costa Glen preceded the crash. Vi didn’t. Very, very slowly, that market is coming back as the housing market strengthens. In the meantime, though, it has been a painful experience for the developers of facilities selling since 2008.

There is also a hybrid model that calls for a stiff nonrefundable deposit, often $20,000-$60,000. This is an easier sell than the model discussed above.

The rental category is, by far, the largest percentage of the assisted-living facilities. They typically come in two flavors: moderate priced and luxury. Most of the moderate priced are in aging structures. In this county, few moderate-priced facilities have been built in the past quarter century.

Most of the facilities built recently are of the luxury variety. They typically have a broad range of services available, including independent living with food, assisted living (incorporating a medical component), skilled nursing and Alzheimer’s/dementia — something for everybody. And the resident profile remains steady: 75 percent single women aged 80-85 years of age.

The operation of one of these luxury facilities is like operating a combination resort hotel and hospital. Very often, the staff ratio is as high as one for every three residents. Most of these facilities have elaborate dining and social and recreational components, including the occasional spa.

The typical resident is there for five to six years. Food is a highly important component of the satisfaction index, as the dining facilities are the heart of the social scene, according to Michael Grust, CEO of Senior Resource Group. Fulfilling culinary desires is not easy because you are asking people to eat three meals a day in the same restaurant for several years. And for a multimarket operator, it is necessary to cater to the tastes of each region. Matzo ball soup may not play well in Nashville.

The Senior Resource Group facilities generally have 300-400 residents, multiple dining rooms and a broad range of services. Take a look at their website, Particularly note their new Maravilla project in Scottsdale, Ariz. Sinful opulence.

In the Senior Resource Group facilities, technology is playing a role in the business, too. For instance, the library is being replaced by an Internet center. And using databases with their residents’ life histories, they can form affinity groups (i.e., former military; folks from Peoria, Ill.; etc.), and generally tie the six levels of separation to enhance the social scene. Also, educational courses are offered, often in conjunction with local colleges.

A much stronger effort is being made for intergenerational visits. In other words, there are facilities to keep the little kids busy while parents visit their parents. Connectivity is on the priority list.

The future for these senior “cruise ships” is getting brighter, thanks to demographic patterns and a stabilizing housing market. The big trick is convincing elderly folks (usually widows) to leave the homes they own free and clear and have owned for 30-40 years and trade that in for a communal setting that will cost $3,000-5,000 per month. It’s not an easy sell.